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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: zonder who wrote (16009)	11/17/2004 6:59:03 AM
From: jrhana	Respond to of 116555

Interesting post-thank you

To: zonder who wrote (16009)	11/17/2004 8:26:05 AM
From: mishedlo	Respond to of 116555

NG Rig count increase 46%, output declines 3.3%. beacon1.rjf.com

To: zonder who wrote (16009)	11/17/2004 12:37:08 PM
From: ild	Read Replies (1) \| Respond to of 116555

Wachovia said its earnings would be 1.8% higher if Fed funds rate rose to 3% in a year, and 0.8% lower if it decreased. · Bank of America said net income from interest would gain 0.4% with higher rates and fall 0.7% with lower rates. · Comerica will gain 5% in net interest income on higher rates and lose 4% on lower rates · Bank of New York said it will gain up to 1.5% on higher rates and lose 0.1% on lower rates. Do they assume NO flattening of the interest rate curve?

To: zonder who wrote (16009)	11/17/2004 1:36:59 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Heinz: see the long bond's unchanged now, after a big PPI number. now why might that be? the reason is imo that the bond market is looking beyond this number and concluding that it might tempt the Fed to invert the yield curve Zonder: Why would the Fed want to invert the yield curve, and how on earth is a high inflation number a temptation to do so? Mish: Zonder I believe you misunderstand the phrase "temp the FED". He does not mean the FED would do this on purpose, rather it may happen because the bond market simply does not believe in the long term inflation aspects. Tempt, in this case means the steep PPI will "tempt the FED to hike more" but the long bond may not follow. If the FED hikes enough and treasuries do not follow, the yield curve will invert. Heinz is suggesting that possibility IMO, not your misrepresentation that the fed was trying to purposely trying to invert the curve. Heinz's view is completely logical IMO. That does not mean he is right, but as you know, I think he is. Look at the action in treasuries yesterday and today. Too many treasury bears and too many place too much faith that a) That the PPI will continue rising b) That 5 rate hikes will not take their toll (I am granting you december but in reality it might not come if jobs data stinks). c) That the tax credits expiring at the end of this year will not take their toll No one, and I mean no one thinks that 5 rate hikes matter. Ponder that last sentence please. Isn't it usually 3 steps and a stumble? Everyone thinks the FED can merrily hike 5 times and bank profits will rise, and the stock market will rise, and corporate profits will rise, and housing will keep going, and consumer borrowing will keep going. It's a PERFECT world isn't it? I think they will have overshot on the 5th one(perhaps badly overshot) and just like in the UK it will prove more than housing will be able to handle. Heinz thinks the FED has already overshot. Treasury action yesterday and today suggests as much. When the stock market figures it out is another matter indeed. BTW the yield curve does not have to invert to proceed a recession. It usually does but not always. The next recession will be a doozie and the FED will be cutting into it when it comes. Mish